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06/29/77 CHARLES FORBES v. LUKE KRAMER & OTHERS

June 29, 1977

CHARLES FORBES
v.
LUKE KRAMER & OTHERS, TRUSTEES



Middlesex. Civil action commenced in the Superior Court on July 30, 1974. The case was heard by Cross, J.

Keville, Grant, & Armstrong, JJ.

SYLLABUS BY THE COURT

Trust, Retirement trust, Trustee's powers. Retirement.

The opinion of the court was delivered by: Armstrong

Where an employees' retirement fund had become insufficient to meet the claims of all its beneficiaries, an amendment to the trust agreement establishing priorities among different classes of eligible members in the realization of their claims on the fund did not impair any vested rights of an employee who had resigned but whose benefits had not been approved for payment prior to the amendment. [478-479]

Under an amendment to a retirement trust fund agreement which established priorities among different classes of eligible members and which included for highest priority members who had terminated covered employment between certain dates and "who demonstrated to the satisfaction of the trustees that such termination of employment was not part of a plan or scheme to secure a priority or preference over other und members in the allocation of und assets," the trustees were not required to prove that an applicant had definite knowledge that the major employer of trust fund members was about to go out of business at the time of his termination. [479]

The plaintiff seeks a determination of his rights to retirement benefits from a trust fund established for members of the Milk Wagon Drivers' and Creamery Workers' Union, Local 380, and an order enforcing those rights in accordance with that determination. The defendants are the trustees of the fund. The plaintiff's grievance lies with a decision rendered by the trustees on February 28, 1974, whereby they denied him priority status in his claim upon the fund, which had become insufficient to meet the claims of all those eligible for benefits thereunder. The plaintiff appeals from a judgment upholding the action of the trustees. There was no error.

Until early 1973 the plaintiff was an employee of Whiting Milk Company (Whiting) and a participant in the retirement fund. On January 14 of that year Whiting held a meeting of its employees, attended by the plaintiff, at which it was announced that Whiting would go out of business unless its employees should agree to substantial pay cuts. At some time between January 23 and January 26 the plaintiff made an appointment at the trustees' office in order to arrange for his resignation from Whiting and his application for retirement benefits from the fund, for which he appears to have been eligible. The appointment was for February 2, at which time an employee of the trustees assisted the plaintiff in preparing a letter of resignation and an application for retirement benefits. The plaintiff delivered his resignation to his supervisor on February 3. It was to take effect February 15, and payment of his retirement benefits would normally have commenced in March, 1973.

Meanwhile, in early February, Whiting notified its employees that it would cease operations on February 17, and did so on that date. Because Whiting's employees represented over sixty percent of the membership of the trust fund, the company's demise left the fund with insufficient money to pay all the retirement benefits to which its retired members were entitled. For that reason the trustees suspended the processing of all claims (including that of the plaintiff) which had been filed after January 15, 1973, in order to devise a system of priorities among the claimants. Such a system was adopted by the trustees on October 30, 1973, in the form of an amendment to their Rules of Eligibility. On February 28, 1974, the trustees held a hearing on the plaintiff's claim and ruled that he was not eligible for priority treatment under the amended regulation, thereby remitting him to his rights as a beneficiary without priority status.

The relevant powers of the trustees under the Trust Agreement appeared in art. V thereof, and included authority to determine all questions of eligibility for benefits and to adopt rules governing such eligibility. *fn1 Under art. VI, § 1, of the Rules of Eligibility so adopted, the trustees were empowered to amend those rules at any time, subject to the condition "that no amendment may reduce any pension benefits which have been approved for payment prior to such amendments, so long as funds are available for payment of such benefits."

The amendment of October 30, 1973, added a new art. VII to the Rules of Eligibility, whereby the assets of the trust fund were divided into three accounts, designated "Account A," "Account B" and "Account C," with highest priority accorded to members eligible for payment from Account A. The members so eligible consisted of the following: (a) "those members and pensioners (or the beneficiaries of members) who were retired and approved for retirement benefits prior to February 18, 1973," and (b) those "who, although not approved for benefits prior to February 18, 1973: (i) had attained age 65 prior to February 18, 1973, and have not continued in covered employment after that date, (ii) were totally and permanently disabled prior to February 18, 1973, (iii) are beneficiaries of a member who died prior to February 18, 1973, (iv) had terminated covered employment prior to January 16, 1973, or (v) had terminated covered employment after January 15, 1973 and before February 16, 1973, and who demonstrate to the satisfaction of the trustees that such a termination of employment was not part of a plan or scheme to secure a priority or preference over other Fund members in the allocation of Fund assets " (emphasis supplied).

The plaintiff's claim of priority was based on his assertion that he fell within the last of those categories. In their decision of February 28, 1974, the trustees disqualified him from participation in Account A because he failed to demonstrate to their satisfaction that his retirement had not been part of a plan to obtain priority over other members of the trust fund. The crucial portion of that decision is set forth in the margin. *fn2

The trial Judge ruled that the plaintiff's rights were governed by the amendment to the Rules of Eligibility adopted on October 30, 1973, because his claim for benefits had not been approved for payment prior to that date, and that the amendment was a sensible and reasonable solution to the problem with which the trustees were confronted. He further ruled that the trustees were warranted in inferring that the plaintiff's resignation was motivated by the hope of thereby obtaining a preferential claim against the trust fund, *fn3 and, at any rate, that they were entitled to conclude that the plaintiff had failed to satisfy them to the contrary. Finally, the Judge found and ruled that the plaintiff had not sustained his burden of "showing that the actions of the trustees were arbitrary, capricious or in bad faith."

1. The plaintiff's first contention is that the amendment of October 30, 1973, could not validly apply to him. His principal argument in support of that contention is that his rights in the trust fund had vested on February 15, 1973, the date of his resignation, and that the trustees could not thereafter abridge those rights by amendment to the Rules of Eligibility or otherwise. He relies on Danti v. Lewis, 312 F. 2d 345, 348-349, 351 (D.C. Cir. 1962), where it was held by a divided court that the ...


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